Discussion
of proprietary business-related information pertaining to operations
of the Medical Center, where disclosure of such information would
adversely affect the competitive position of the Medical Center,
and consultation with legal counsel with respect to IDXs
performance under its agreement. Consultation with legal counsel
regarding compliance with federal regulations concerning clinic
operations of the Medical Center. Discussion of proprietary business-related
information pertaining to the operations of the Medical Center,
where disclosure of such information would adversely affect the
competitive position of the Medical Center. Consultation with
legal counsel with respect to possible restructuring of the University
of Virginia Health System. All of these items are provided for
in Section 2.1-344(A)(7) and (23) of the Code of Virginia.

I.
Conflict of Interest Exemption

BACKGROUND:
The School of Medicine is negotiating two sponsored research contracts
with ADENOSINE THERAPEUTICS, LLC, a Virginia biotechnology company
created in 1998 to pursue the use of various compounds to either
activate or inhibit specific adenosine receptors found on various
tissues. The biotech company expects to receive two awards from
the National Institutes of Health, and technology has been licensed
to it by the University of Virginia Patent Foundation which has
a 5% equity interest in the company.

Six
University faculty members own three percent or less of the equity
in the company. Five faculty members own in excess of three percent.
Under the Virginia Conflict of Interests Act, the Universitys
contracting with Adenosine Therapeutics would place its faculty
who own in excess of 3% in violation of the Act, unless the Board
of Visitors approves the conflict created by their equity interest.
State law grants such approval authority to the Board in the case
of sponsored research, in order to allow research furthering the
public interest.

DISCUSSION:
The research contracts would help fund research into synthetic
compounds. It is believed that these compounds have great potential
as agents to better detect coronary artery disease.

Virginia
law and University of Virginia policy will require Drs. Beller,
Kron, Linden, MacDonald, and Sullivan to file annual disclosure
statements of economic interests in the company. None of the faculty
is involved in the Universitys negotiation, approval, or
procurement of contract terms with Adenosine Therapeutics. The
Chair of the Department of Internal Medicine heads a University
oversight team responsible for managing and overseeing the research,
including independently supervising, evaluating, and making personal
decisions to ensure that the continuing best interests of the
University are served. As an additional precaution, the Chair
will report at least each quarter to the Dean on the progress
of sponsored research activity and the utilization of University
resources.

ACTION
REQUIRED: Approval by the Health Affairs Committee and by
the Board of Visitors

CONFLICT
OF INTEREST EXEMPTION

WHEREAS,
the School of Medicine wishes to enter into a sponsored research
contract with Adenosine Therapeutics, LLC, a Virginia Corporation,
for developing therapeutic agents; and

WHEREAS,
George Beller, M.D., Irving Kron, M.D., Joel Linden, Ph.D., Timothy
MacDonald, Ph.D., and Gail Sullivan, Ph.D., have disclosed in
advance their equity interests of 4%, 6%, 25%, 8% and 4%, respectively,
in Adenosine Therapeutics, LLC., and the Universitys entry
into a research agreement with Adenosine Therapeutics, LLC, would
thereby expose them to violation of the Conflicts of Interest
Act unless approved by the Board as permitted by §2.1-639.6(C)(7)
of the Code of Virginia;

RESOLVED
that the arrangement with Andenosine Therapeutics, LLC, is approved
by the Board of Visitors in order to permit the University to
negotiate and enter into a proposed contract for developing therapeutic
agents. This approval is granted provided, as required by the
law, the faculty file the required annual disclosure statement
of personal interests in Andenosine Therapeutics, LLC, the University
files the required annual report concerning the contract with
the Secretary of the Commonwealth, and the Chair of the Department
of Medicine vigilantly oversees application of University resources
in the best interests of the University and in accordance with
policy.

II.A.
University of Virginia Medical Center Financial Report as of
June 30, 1999

BACKGROUND:
The Medical Center prepares a quarterly financial report and reviews
it with the Executive Vice President and Chief Financial Officer
before submitting the report to the Health Affairs Committee of
the Board of Visitors. The Health Services Foundation (HSF) prepares
and presents financial statements to the HSF Board and to the
Vice President and Provost for Health Sciences.

DISCUSSION:
For Fiscal Year 1999, gross inpatient revenue was 3.0 percent
less than budget and gross outpatient revenue was 3.7 percent
less than budget. The Medical Center has experienced a decrease
in indigent care charges ($10.1 million less than budget for the
Fiscal Year) while there was an increase in bad debt of $0.7 million
greater than budget for the Fiscal Year. In addition, the Medical
Center is experiencing better than expected contractual adjustments
resulting in a $11.2 million favorable comparison to budget. These
activities, in combination with miscellaneous revenue being $0.5
million greater than budget, result in total operating revenue
being very close to budget at $2.6 million above or only six-tenths
of a percent greater than budget.

Expenses
are higher than budget primarily because of the cost in the category
of Medical Supplies and Pharmaceuticals, which represent $12.6
million of the variance from budget. Purchased Services &
other expenses represent another $7.4 million of the variance.
Salaries & Wages have increased to be $1.0 million over budget,
Medical Center Contracts are $2.3 million over budget, and Bad
Debt is $0.7 million greater than budget. Favorable Fringe Benefits
and Depreciation & Amortization partially offset these unfavorable
variances. As a result, the operating margin is 2.3% of net operating
revenue and $17.2 million less than budgeted.

The
Medical Centers financial position at the end of Fiscal
Year 1999 is sound. The 2.3% operating margin compares favorably
to other academic hospitals around the country. The greater than
budget total revenues were enough to offset operating expenses
that were 4.5% greater than budget.

The
commitment to achieving a 4% operating margin as a percentage
of net operating revenue in Fiscal Year 2000 holds firm, albeit
very challenging given the Fiscal Year end 1999 financial results.
In response to this situation, the Vice President and Provost
for the Health System and the entire staff of the Medical Center,
continue to work toward ensuring aggressive medical management,
cost containment, and process improvement with an emphasis on
both quality patient care and lower cost.

ACTION
REQUIRED: None

II.B.
Medical Center Process Review

BACKGROUND:
In light of increased competition and economic challenges facing
academic health centers, the Medical Center is vigorously pursuing
opportunities to cut costs. Intense focus is on improving medical
management and on streamlining administration to create savings.
Considerable progress has been made to date. Continuing and expanded
efforts are planned.

DISCUSSION:
Mr. Carter will review steps that are underway to streamline the
Medical Centers administrative activities to effect savings.

ACTION
REQUIRED: None

II.C.
Vice Presidents Remarks

DISCUSSION:
Dr. Cantrell will update the Board of Visitors on significant
events and developments at the Health System since the May meeting.
An overview of items presented to the Health Affairs Committee
at its June, July, and September meetings will be presented.